Felicia Day

Last fall, Felicia Day needed a little bit of help. The actor and writer faced the Herculean task of filling out hundreds of customs forms by hand in order to mail copies of the first season of her Web series, "The Guild." The DVDs were sprawled throughout her apartment, spilling into her garage, and Ms. Day was only able to handle the load with the help of her producer, Kim Evey, and a few volunteers.

"I never want to fill one out ever again," the 29-year-old Ms. Day says.

That do-it-yourself ethos has permeated "The Guild," which enters its third season Tuesday. The story of a ragtag and emotionally challenged troupe of online videogame players has netted more than 10 million times online and earned a sponsorship deal from Sprint and a distribution deal from Microsoft. The music video for the series, "Do You Wanna Date My Avatar," has been viewed more than 2 million times on YouTube since its release last week, and topped the video downloads chart of the iTunes music store.

Yet despite all of Ms. Day’s success, "The Guild" is still a modest venture. The first season of the show was paid for "with bagels," says Ms. Day, and the second was initially launched without a funder before Microsoft stepped in. Even then, its budget is only enough to keep two workers employed full-time: Ms. Day and Ms. Evey.

Two years ago, the Internet was aflutter with the potential of Web video. Scripted series, such as "Ask a Ninja" and "Chad Vader," were courting development deals, and actress Jessica Rose, the star of the "Lonelygirl15" series on YouTube, was gracing the cover of magazines such as Wired. Hollywood agencies were starting online talent departments and media companies were looking for ways to profit from the influx of new material.

That exuberance has since dissipated. "It’s been a tough year," says Scott Roesch, general manager for Atom.com, a Viacom-owned portal that focuses on material for young males. "A lot of people have realized that Web video is no longer at the stage where if you build it, they will come. You can’t just throw $500,000 with a nice Web site and expect that to be a business." Although they’ll still be launching more than a dozen new series over the next year, Mr. Roesch says that Atom is scaling back its development budgets and focusing on building online communities.

Now, the shift is back towards celebrity-backed projects, such as Lisa Kudrow’s Lexus-sponsored comedy "Web Therapy" and "Napoleon Dynamite" lead Jon Heder’s "Woke Up Dead," which debuts in October. "Media companies want known quantities," says Chris Albrecht, co-editor of NewTeeVee which covers new media.

What has replaced the big budget projects is a more stripped down, organic approach to developing Web projects. Ms. Day does all of her own publicity and marketing. She coordinates the distribution arrangements for the series as well as writing all of the scripts. Each morning, she spends time cultivating her online personality through social networking sites, such as Twitter, where she currently has more than 1 million followers. (That’s more than MSNBC host Rachel Maddow and Twitter co-founder Biz Stone.)

One of her big attractions has been Ms. Day’s appeal to women who love videogames like she does. Last week at BlizzCon, a large gaming conference for titles like "World of Warcraft," Ms. Day says she was approached by dozens of women who appreciated that she represented them. About 40% of watchers of "The Guild" are female, she says. Many of the popular female figures in the videogame community, such as television host Olivia Munn, who recently appeared in a bikini on the cover of "Playboy," have more overt sex appeal.

"If you cruise through the top YouTube video categories such as comedy, all of the thumbnails [images from the video] have a hot girl with cleavage. What ends up most highly trafficked involves stupid women," says Xeni Jardin, executive producer for Boing Boing Video. "She’s not pasted on as a figurehead by some online programming guy in a script that panders to Internet types."

As a result, "The Guild" has developed a very loyal following. Rather than experiencing the peaks and valleys in traffic that many other Web video series face, Ms. Day’s show has steady traffic from week to week, similar to the viewing patterns of a popular primetime television show. The first season was partially funded by her viewers as she took donations via PayPal (600 people contributed). From the DVD sales of the first season, Ms. Day was able to start the second season without a sponsor lined up.

When I met Ms. Day at a breakfast place close to her apartment in Hollywood, she was polite and petite with the faint hint of a drawl from her childhood days of dotting around the South when her father would move from military bases as an Air Force doctor. Ms. Day went to college on a violin scholarship and studied theoretical math at the University of Texas in Austin before moving to Los Angeles to pursue an acting career.

But getting work in Los Angeles was difficult, and Ms. Day turned to videogames to fill her time. She quickly became addicted to "World of Warcraft," an online fantasy game, and eventually her friends had to intercede on her behalf as she was spending so much time online. Her game experience served as fodder for the first script of "The Guild." (It’s not specified in the series what game is played.)

"The Guild" both adores and lampoons the world of its videogame-obsessed characters. Ms. Day stars as Codex, the neurotic protoganist, who must fend off the amorous proposals of Zaboo (played by Sandeep Parikh) and manage the rest of her clan. Soon, the group of online players are interacting in real life with disastrous results.

In 2007, Ms. Day started production. They borrowed video cameras from Mr. Parikh and pulled in favors from other pals—one of the locations was the director’s roommate’s brother’s office. "It was a shoe-string budget," says Ms. Evey.

Because Ms. Day has taken on a variety of roles in producing the show, she’s been required to develop her business philosophy. Early on, she was approached by media companies that were interested in purchasing her show outright, but Ms. Day demurred. "The revenue split was ridiculous. It’s almost insulting to hear that someone will take so much of something that I did for free," she says.

She was only interested in platforms that would give her show wider reach. "Maybe you could do a little wider distribution, but it’s an Internet show, so it’s going to be everywhere anyway. So why are you taking all of my money?" So when Microsoft approached Ms. Day and let her keep the intellectual property for the show, a deal was quickly signed in the parking lot of a Los Angeles breakfast shop.

Despite the online success of "The Guild," the show hasn’t opened any new doors for Ms. Day’s acting career aside from those she makes for herself. She played the love interest in "Dr. Horrible’s Sing-Along Blog," but such roles are sparing. "In Hollywood, I’m the cat lady. I’ve done it six times, but I can’t turn them down because those are the roles they give me," she says. "I’m still this quirky girl with a nonstandard face."